The annual income earned by Indian people is the less as compared to other countries. Here, the common tradition is savings by avoiding expenses of small things. But a new research suggests how Indians could boost their income.

Scientists reveal the challenges that Indians face in being able to participate effectively in the formal financial system. Most of the times, it contains policy recommendations to address the issues in the current Indian financial framework.

The report suggests if every Indian would stop investing in personal assets such as gold, and real estate and efficiently utilize money in insurance, pensions, and short-term loans, they could boost their annual incomes. This strategy could bring confidence to make wiser financial decisions to improve their long-term security.

Scientists explained, “For example, by avoiding the interest burden of emergency credit associated with medical costs, the report finds that the average Indian household could boost its income between 3 and 8 per cent.”

The reports also involve recommendation through which Indian households can make better financial decisions. It increasing incentives for first time home buyers with mortgage tax deductions, removing tax exemptions on income from property, discouraging real estate as a pure investment and encouraging people to register all gold transactions electronically.

Furthermore, the household could also make use of electronic know-your-customer (eKYC) standards, whilst setting up a sensible framework for data privacy, and the rationalizing of distribution incentives for insurance policies.

No doubts, Indian households are often reluctant to use banks, strongly associating formal institutions with administrative burdens and complicated paperwork. Even many individuals were found to be burdened by high levels of unsecured debt, including debt taken from non-institutional sources such as moneylenders.

Professor Ramadorai said: “A large fraction of Indian household wealth is held in the form of physical assets rather than financial investments, and Indian households currently underinvest in pensions and insurance.These issues mean that household budgets will come under increasing pressure on account of demographic factors among other things. I hope this report has identified a number of ways in which Indian financial markets can be made to work better for households.”

Scientists even found that many Indian households have lack of trust in financial institutions. This may be the reason behind household’s tendency to eschew financial products and to invest in assets such as gold instead. Cultural factors may also influence this tendency.